Financial advice and global consulting alixpartners has released its new projections for the future of the 100% electric vehicle market. In his conclusions he forecasts that sales could reach a market share of 33% in 2028 and 54% in 2035, thanks to increased demand in the world’s main markets. It also explains the advantages that it can have separate lines of business of electric and combustion vehicles, related to the price of the raw materials they require.
In 2021, electric vehicles represented 8% of sales worldwide. The figures available in the middle of this year indicate that this percentage has risen in the first three months of 2022 to 10%.
According to the company’s annual report Global Automotive Outlook which ensures that electric vehicles reach a market share of 33%, car manufacturers and suppliers would have to invest in total $527 billion between now and 2026. This amount represents more than double the 234,000 million dollars forecast for the next five years, according to the expectation for investments in electric vehicles planned for 2020 to 2024 published by the agency Reuters.
Mark Wakefield, managing director of AlixPartners, assures that increased investments has made the growth of electric vehicles imperative. Companies are funneling huge amounts of capital into electric vehicle companies, even without a guarantee of success. Growth is a necessity to justify the massive spending that some companies have made, such as General Motors, with $35 billion committed to electrification.
The transition from internal combustion engine vehicles to electric vehicles still poses economic problems for the industry, mainly related to the supply chain. Growth will require “drastic changes in operating models, not just in plants and people, but in the entire way of working,” says Wakefield. Some manufacturers have chosen separate the business lines of combustion and electric vehicles. It is the option that Ford has chosen for example.
Ford CEO Jim Farley announced in March that Ford would run all electric vehicle businesses under the “Model e” name, while combustion vehicles would operate under the “Ford Blue” division. Renault is also investigating the possibility of bundling its combustion and hybrid-related activities into a separate unit that would be based outside of France. Between both companies they would add around 10,000 employees in 2023.
Separating the divisions could be an advantage as these two propulsion technologies require different amounts of raw materials, which is a significant difference in price and can complicate finances. In May 2022, the median price of raw materials for an electric vehicle was $8,255 per vehicle compared to $3,662 for combustion.
Elmar Kades, CEO of AlixPartners estimates that the transition from combustion to electric vehicles will cost automakers and suppliers $70 billion in 2030, including bankruptcies and restructuring. AlixPartners predicts that the shortage of supplies will persist until 2024causing total worldwide sales to decline to 79 million units this year, rising to 95 million in 2024.